China and the World of Business • China Business and the World

I wrote in June that the current downturn in the worldwide market for large ships would hit Chinese shipyards especially hard, constituting as they do some 20% of global shipbuilding capacity. The shipyards had little to fear, I noted: if for no other reason than the sheer number of people employed at China’s shipyards (and memory of the Gdansk shipyards as the birthplace of Lech Walesa‘s Solidarity movement, an event that presaged the disintegration of communism in Eastern Europe), the central government would do anything they could to keep the yards operating, orders or not. Yet rather than simply pay for the production of more surplus tonnage that nobody would want, or for make-work or no work, the government would instead get the yards to re-tool to produce naval vessels – if not warships and landing vessels, then naval auxiliaries like replenishment ships, transports, and maritime patrol ships.

Sure enough, Hu Wenming, chairman of China’s second largest shipyard operator, China State Shipbuilding Corporation, was in Beijing during the just-wrapped 18th Party Congress lobbying to get orders for naval and “fishing” vessels. He is the first: expect the line of shipyard managers and owners to form behind him.

With China’s now-open goal of becoming a maritime power, the timing of the global shipbuilding downturn and stiff domestic competition means China can conduct its naval buildup at an accelerated pace AND at a lower cost that it might have otherwise. And the yards, instead of going bankrupt, will get contracts that will likely be more lucrative than orders for container ships, cruise liners, bulk carriers, and tankers. Who knows? Many may never go back.